Idaho’s big-money broadband battle rages on in court

Kevin Richert01/25/2016

Everyone agrees on this much: The Idaho Education Network is dead.

In a brief filed last week, an attorney for network vendor Qwest pointedly refers to the statewide broadband system in the past tense. The state’s hired attorneys place all the blame for the demise at the feet of Syringa Networks — and a six-year legal campaign that “succeeded in destroying” a network that connected high schools across the state.

The Idaho Education Network is dead.

The Idaho Education Network lawsuit is very much alive.

About the case — and about this story: In November 2014, Ada County District Judge Patrick Owen voided the $60 million contract for the Idaho Education Network, a statewide high school broadband system. That ruling is now under appeal in the state Supreme Court. Here’s a summary of the case, based on Idaho Education News’ review of more than 450 pages of recent legal filings.

And the state — and its contractors — have millions of dollars riding on the outcome. Idaho could still lose more than $25 million if it loses on appeal. If Syringa prevails in court, again, Qwest and fellow vendor Education Networks of America could be forced to pay some $30 million back to the state.

So why is this case still in the courts? And what’s at issue? Here is a recap of the Idaho Education Network appeal before the state Supreme Court:

Idaho’s $25.2 million e-Rate problem. Remember e-Rate? Back when the Idaho Education Network was alive and well, e-Rate dollars covered about three-fourths of the state’s broadband costs. The money is collected on monthly landline and cell phone bills, and comes — or came — through the Federal Communications Commission.

But as Syringa’s lawsuit worked its way through the courts, an FCC contractor put $11.9 million worth of Idaho e-Rate payments on hold. Then there’s the $13.3 million the feds have already paid the state.

That means Idaho could lose $25.2 million, if it loses on appeal. That gives the state a compelling reason to take the case to the Supreme Court, state’s attorneys Merlyn Clark and Steven Schossberger wrote in a brief filed last week.

The vendors’ $29.7 million problem. In November 2014, Ada County District Judge Patrick Owen sided with Syringa, tossing out the Idaho Education Network contract. But Owen did not go along with Syringa on one key point. He did not order the state to demand vendors pay back the money they received under the illegal contract.

So while Owen’s ruling represented a big win for Syringa, the company is going before the Supreme Court, arguing that Owen didn’t go far enough. Syringa argues that state law is clear and compulsory. Vendors cannot profit from a contract that has been ruled illegal, and when a contract is thrown out, the state must recoup its money.

The state disagrees — saying Owen had the discretion to weigh the repayment issue. In a brief last week, Qwest attorney Stephen Thomas argues that the utility was simply paid for services that benefitted thousands of Idahoans.

Either way, the stakes are huge. By the time Owen tossed out the Idaho Education Network contract, vendors had been paid $29.7 million. If Syringa prevails in Supreme Court — and Idaho actually recouped this $29.7 million — this money would more than cover the $25.2 million could lose on e-Rate.

About those legal fees … Here’s where things get really sticky, even by Idaho Education Network litigation standards.

Owen’s ruling granted Syringa more than $930,986 in legal fees — plus an additional $20,000 to cover the cost of calculating its $930,986 legal bill. In a December brief, Syringa attorneys David Lombardi and Melodie McQuade say Owen’s ruling “will serve as a deterrent to future unlawful action, and will provide some relief to Syringa, which has borne a huge financial burden attempting to correct (the state Department of Administration’s) actions.”

Not surprisingly, the state wants the Supreme Court to overturn Owen’s ruling on legal fees.

Meanwhile, the state’s attorneys are seeking some — but not all — legal fees from Syringa. Specifically, they have targeted Syringa’s demand that the state recoup payments to vendors, calling it a frivolous lawsuit filed simply for the purposes of “vexation and harassment.”

Education Networks of America, the lead vendor on the Idaho Education Network contract, is also seeking legal fees.

Syringa’s $1.4 million. Throughout the protracted legal battle, Syringa has painted itself as an outsider, cut out of a share of the $60 million Idaho Education Network project.

Yet the company received $1,438,367 from 2011 through 2013, for work provided to Qwest.

No one disputes that the work took place — or the fact that Syringa got paid for it. The issue is what it means, in the bigger picture of the appeal.

Lombardi and McQuade say this “limited contract” doesn’t change the underlying fact that Syringa was excluded from bidding for Idaho Education Network contracts. They argue that the contracts, amended in February 2009, cut Syringa out of the competition.

Clark and Schossberger, Idaho’s outside counsel, accuse Syringa of hedging its bets. And once Syringa took a share of the state’s business, they say, the company sacrificed its right to contest the Idaho Education Network contract. Qwest sides with the state.

The ‘prevailing party?’ Owen’s ruling reverberated through the Statehouse, and ultimately forced lawmakers to abandon the Idaho Education Network project midstream. And in their legal brief, Lombardi and McQuade don’t hesitate to give their client credit. They say Syringa managed to break Qwest’s “publicly-funded monopoly control” of state broadband business.

The popular storyline holds that Owen handed Syringa an undisputed legal win. Clark and Schossberger dispute this notion, pointing out that Owen rejected a Syringa motion seeking more than $60.2 million in damages. “For prevailing party purposes, the (Administration Department’s) avoidance of having to pay any of this staggering sum is equivalent to a plaintiff winning a money judgment.”